Most buyers wrongfully believe that relationships don’t count in business purchase and sale transactions. They think that getting the best possible price and terms is the most important. I personally experienced instances when misunderstandings and lack of communication were responsible for long delays and additional costs to transactions or even the cause of promising deals falling through. In other instances, deals that seemed impossible still happened because sellers and buyers cooperated fully simply because they liked each other!
Most experienced deal makers understand that numbers, while very important, don’t make deals happen but people do. Establishing a relationship with the seller is paramount for a buyer. There are two main reasons why relationships are deal drivers:
- We trust people we know and like. The deal making process involves a lot of uncertainty both for buyers and sellers. Uncertainty means perception of risk. If this perception is beyond the risk tolerance threshold then no deal can be made. Human interaction and socializing reduces this perception of risk.
- Most people make decisions emotionally and then rationalize them. This is the nature of human beings. Even famous CEO’s of large multinational companies operate the same way. If the seller likes you personally, he/she will find reasons to sell you the business for reasonable price and terms. On the other side, if the seller doesn’t like you, he might change his mind about the whole idea of selling the company just to justify not selling to you.
I frequently come across buyers who justify their lack of social skills by believing and acting as if business results only depended on rational behavior where economic benefits are the only considerations. Time has proven again and again that this is an old theory with a lot of limitations. Business people do act emotionally and managing emotions will always be a success factor in business.